Armstrong v. Exceptional Child Center

Deamonte Driver, a twelve-year-old Medicaid beneficiary, died from an untreated tooth abscess when the infection spread to his brain.[1] His death could have been prevented had his tooth been removed months earlier when it first started to ache.[2] Unfortunately, only roughly 16% of dentists in Maryland accepted Medicaid patients at the time, largely due to low reimbursement rates.[3] Because so few dentists accepted Medicaid, Deamonte’s mother could not find any dentists willing to treat her son.[4] In the ten years since Deamonte died, Maryland has worked to address the problem, though it is far from solved nationally.[5] In 2015, health care providers were still seeking to increase low Medicaid reimbursement rates in Armstrong v. Exceptional Child Center, Inc.[6] Unfortunately, thanks to Exceptional Child Center’s holding, providers are unlikely to see higher reimbursement rates anytime soon, and as a result, Medicaid patients are unlikely to see equal access to health care services. This Post will first describe what the Medicaid equal access provision is, before addressing the Exceptional Child Center decision, and how it impacts Medicaid beneficiaries’ ability to access health care. Finally, this Post will argue that providers are best situated to ensure Medicaid beneficiaries receive equal access, and therefore, should be given an enforcement right.

Section 30(A) of the Medicaid Act, also known as the equal access provision, requires states to set Medicaid reimbursement rates that ensure Medicaid beneficiaries have access to the same type and quality of care available to the general public.[7] In Exceptional Child Center, the Court considered whether Medicaid providers can sue to enforce the equal access provision.[8] The District Court entered summary judgment for the providers, holding that the State failed to set rates in a manner consistent with the equal access provision.[9] The court highlighted that Idaho’s Department of Health and Welfare had performed studies in 2006 and 2009 showing that actual provider costs exceeded the reimbursement rates, meaning that providers lost money when accepting Medicaid patients, and that rate increases were necessary to comply with the equal access provision.[10] Despite these findings, the state legislature did not appropriate funds.[11] The Ninth Circuit affirmed the District Court, adding that “the providers had an implied right of action under the Supremacy Clause to seek injunctive relief.”[12] The Supreme Court reversed the lower courts, holding that “the Supremacy Clause is not the source of any federal rights, and certainly does not create a cause of action.”[13] In addition, the suit could not proceed in equity because the statute both implicitly precluded private enforcement and was judicially unadministrable.[14]

Justice Scalia, writing for the majority, determined that the Medicaid Act implicitly precluded private enforcement.[15] The Court cited the familiar canon that the express provision of one enforcement method suggests Congress intended to preclude others.[16] The Medicaid Act grants the U.S. Department of Health and Human Services (HHS) an enforcement right that allows it to withhold federal funds from states that fail to comply with the Act.[17] The Court reasoned that because the statute’s only stated remedy for a state’s breach of the Medicaid Act is the withholding of funds by the HHS Secretary, Congress implicitly precluded all other remedies.[18] In addition, because the equal access provision is so broad and complex, the Court concluded that Congress must have intended agency enforcement alone, in order to achieve consistency and expertise, rather than leaving open the possible inconsistencies that can arise from varying judicial interpretations.[19] The Court acknowledged that there is a “long-established practice of enjoining preempted state action” by private parties, but concluded “a ‘long-established practice’ does not justify a rule that denies statutory text its fairest reading.” The fairest reading of the equal access provision is that equitable relief is foreclosed.[20]

Justice Breyer concurred in part and concurred in the judgment, emphasizing that courts are not well-positioned to be rate makers, and agencies are far better equipped for such tasks.[21] Justice Breyer further emphasized that the HHS Secretary can enforce the equal access provision by withholding federal funds, or may be able to sue a State to compel compliance.[22] Additionally, the providers could ask HHS to interpret offending regulations, but admitted this would result in only arbitrary and capricious review, which would make it difficult for providers to prevail.[23]

Justice Sotomayor wrote for a four-justice dissent, concluding the majority acted without precedent or demonstrable congressional intent when it foreclosed private parties from invoking the equitable powers of the federal courts to require state actors’ compliance with federal laws.[24] Further, Justice Sotomayor pointed out that Congress is well aware of the court’s equitable authority, and could—and sometimes does—expressly or implicitly preclude Ex parte Young enforcement actions if it chooses.[25] Even worse, the majority relied only on one decision, Seminole Tribe, which is factually very different because the statute at issue provided a detailed scheme that would render judicial enforcement superfluous.[26] No such statutory scheme is present for the enforcement of the equal access provision.[27] Further, the dissent highlighted that HHS’s purported enforcement mechanism, withholding funds, is self-defeating in this case.[28] HHS wants providers to be better compensated, so cutting funding is unlikely to further HHS’s objective.[29]

Tellingly, former HHS officials wrote an amicus brief in support of the providers, emphasizing that HHS relies on Ex parte Young enforcement actions, and does not have the budget to execute oversight and enforcement of the equal access provision.[30] This point is underscored by the fact that of the hundreds of billions of dollars allocated to Medicaid, only $2.44 per beneficiary is allocated for administering Medicaid.[31] The former officials stressed that the rest of the budget funds mandatory services and could not be allocated to administration, and HHS was not likely to see a budget increase to enforce the equal access provision.[32] The fact that former HHS officials warned the Court that HHS was not prepared to ensure Medicaid beneficiaries receive equal access to care weighs heavily in favor of action extending an enforcement right to providers.

In the wake of Exceptional Child Center, Centers for Medicare and Medicaid Services (CMS) promulgated a final rule that attempts to add teeth to the equal access provision.[33] The new rule does not set standards by which states’ compliance with the equal access provision can be measured, but asks states to “review data and trends to evaluate access to care.”[34] In addition, states are to perform studies every three years to assess whether their standards are being met, and address deficiencies.[35] The problem with this rule is that it does not provide any additional remedies for when states fail to meet the equal access provision.

Four main stakeholders are affected by the equal access provision and the Exceptional Child Center ruling: (1) Medicaid beneficiaries like Deamonte Driver who may not be able to receive adequate care if the provision is not enforced; (2) state legislatures responsible for appropriating funds; (3) HHS, which administers Medicaid; and (4) health care providers who accept Medicaid patients. For reasons discussed below, providers are likely in the best position out of these four groups to enforce equal access, but Exceptional Child Center makes it much more difficult for them to do so. Accordingly, Congress should grant providers a private right to enforce the equal access provision.

While Medicaid beneficiaries may be impacted the most by unequal access, their status as low-income individuals, potentially with health issues, leaves them in a weak position to hire attorneys to sue the State—this is particularly true when the remedy is an injunction, meaning attorneys do not stand to make contingency fees. State legislatures could also remedy this problem by setting rate increases and appropriating funds, but as witnessed in Exceptional Child Center, appropriating funds is a highly charged issue, and is heavily influenced by political interests and lobbying. In the wake of Exceptional Child Center, it is likely providers have increased lobbying efforts, but lobbying is indirect and less efficient than judicial review.

HHS, the third major stakeholder, attempted to strengthen its oversight mechanisms when it promulgated the new rule, but as discussed above, the new rule does not add any additional enforcement mechanisms. Instead, it requires states to spend more money collecting data and doing surveys. This process is inefficient, because providers are already acutely aware of how much Medicaid pays in comparison to private insurance, including whether accepting Medicaid patients costs more than what reimbursement rates cover. Providers are also more likely to be aware of other regional factors beyond reimbursement rates that may be hindering equal access, whereas HHS operates on a national level and has to spend much more time and money getting acquainted with local issues.

Regardless of the legal implications of Exceptional Child Center, the practical implication is that Medicaid beneficiaries suffer. Kids like Deamonte Driver should not have to die because their parents cannot find a dentist to treat them. If one believes Medicaid beneficiaries should get the same access to health care as the general public, allowing providers to bring private enforcement actions is the most efficient way to ensure it.

42 U.S.C. § 1396a(a)(30)(A) (“A state plan for medical assistance must . . . assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area.”). ↑

Brief for Former HHS Officials as Amici Curiae in Support of Respondents, at 6, Armstrong v. Exceptional Child Center, Inc., 135 S. Ct. 1378 (2015). (“Not only has HHS historically understood and accepted that the Medicaid Act is privately enforceable, it has come to rely on that fact. Every aspect of the Department’s administration of the Medicaid program—from its regulations to its annual budget—is premised on the understanding that private parties will shoulder much of the enforcement burden. CMS lacks the logistical and financial resources necessary to be the exclusive enforcer of the equal access mandate, and it is highly unlikely to receive the necessary resources in the future.”). ↑

See 80 Fed. Reg. 67,576, 67,579 (Nov. 2, 2015) (“[T]he Supreme Court ruled in Armstrong v. Exceptional Child Center, Inc. . . . that the Medicaid statute does not provide a private right of action for providers and beneficiaries to challenge payment rates in federal court. The lack of a private right of action underscores the need for stronger non-judicial processes to ensure access, including stronger processes at both the state and federal levels for developing data on beneficiary access and reviewing the effect on beneficiary access of changes to payment methodologies.”). ↑